Campaign Finance Myths

Lots of untruths are being spread by the president.

William R. Maurer

November 29, 2010, Vol. 16, No. 11

Since the Supreme Court ruled in Citizens United v. FEC last January, politicians have vied to see who could speak of the decision with the most vitriol. President Obama said he could not “think of anything more devastating to the public interest” and criticized the ruling in his State of the Union address with members of the Court present. Senator Al Franken called it “an incredible act of judicial activism,” while Representative Peter DeFazio is “investigating” whether Chief Justice John Roberts should be impeached.

Politicians were not the only ones to denounce Citizens United. Numerous commentators likened it to DredScott, and a Huffington Post writer even compared the five justices in the majority to concentration camp prisoners who cooperated with the Nazis.

We can expect the rhetoric only to get worse after the recent elections, where Democrats believe they lost a significant number of seats because of “corporate spending” unleashed by Citizens United.

Unhinged rhetoric aside, however, the critics of the decision almost always get their history wrong, have a selective view of Supreme Court precedent, and fundamentally misread the First Amendment. Read correctly, Citizens United represents a necessary correction to a fairly recent anti-free speech trend in the Court’s jurisprudence and is consistent with both the words and intent of the First Amendment.

Notably absent from many criticisms of the decision is any discussion of what the case was actually about. Citizens United concerned a statute that made it a crime for corporations and unions to use general treasury money to make “independent expenditures” (that is, not coordinated with candidates) that expressly advocated the election or defeat of a federal candidate. Prior to Citizens United, corporations and unions could participate in the political process only by creating separate political action committees. PACs operate under complex and expensive administrative requirements, however, and cannot use general treasury funds for political purposes, so few corporations availed themselves of this alternative.

Citizens United is a nonprofit corporation that wished to use its general treasury funds to distribute a film about Hillary Clinton via video-on-demand when she ran for president. Under federal law, however, the film was banned. Citizens United sued the Federal Election Commission to enjoin the law’s application. The group lost at the trial court and then sought review at the U.S. Supreme Court.

In January 2010, a five-justice majority struck down the restriction. The Court stated unequivocally that the First Amendment restricts the ability of the government to abridge the freedom of speech of corporations, especially through an outright ban on speech. The Court overturned two relatively recent decisions, Austin v. Michigan Chamber of Commerce from 1990 and portions of McConnell v. FEC from 2003, which held that the government may ban the independent expenditures of corporate and union entities.

Criticism from proregulation politicians and campaign finance “reformers” was immediate. It typically employs variations on three arguments: (1) Citizens United overturned 100 years of law prohibiting corporations from spending money in elections, (2) the settled view prior to Citizens United was that bans on corporate and union political activity were constitutional, and (3) Citizens United extended free speech protections to corporations, whereas only individuals are entitled to free speech under the First Amendment.

None of these statements is true. They are, instead, myths used to justify a law that made it a crime to publish a book or pamphlet or pay for a yard sign. In other words, they are simply ways to avoid stating plainly that opponents of Citizens United believe the government can constitutionally put people in prison for publishing a book or distributing a movie.

Myth 1: ‘Citizens United’ overturned 100 years of law prohibiting corporations from spending money in elections.

President Obama has been the most notable proponent of this myth. In the State of the Union he said that Citizens United “reversed a century of law that I believe will open the floodgates for special interests . . . to spend without limit in our elections.” In response, Justice Alito was seen shaking his head and mouthing the words “not true.” Alito was right.

While federal law has indeed prohibited corporations from directly contributing to federal candidates since 1907, that portion of the law was not at issue in Citizens United. It remains the law of the land. Direct corporate contributions to candidates are still banned.

The restriction on corporate and union independent expenditures, moreover, had been around only since 1947. Although this is a pretty good vintage, it is not a century. And the Supreme Court had never ruled on the constitutionality of such a ban until 1990, when it decided Austin. In that case, the Court upheld Michigan’s ban on independent expenditures by corporations and concluded that the government could make it a felony for a corporation to publish a book, pamphlet, or newspaper ad urging the election or defeat of a candidate.

The Court’s reasoning in Austin, however, was simply bizarre. The Court held that because of the “corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas,” the government could effectively remove these entities from the political field. The reasoning in Austin was so amorphous and subjective, however, that by the time the Supreme Court heard arguments in Citizens United, the government had simply stopped relying on the decision.

President Obama’s “century of law” thus referred to a 63-year-old law whose constitutional validity was determined 20 years ago in a case the reasoning of which even his own Justice Department rejected. Thus the president’s statement that Citizens United “reversed a century of law” is not even remotely accurate.

Myth 2: Prior to ‘Citizens United,’ it was settled law that government bans on corporate and union independent expenditures were constitutional.

President Obama’s statement also implies that the constitutionality of such a ban was well established. That is not true. The constitutionality of the ban on independent expenditures was disputed from its very inception, and it was only through convoluted efforts by the Supreme Court to avoid directly ruling on the issue that the law was able to survive for as long as it did.

During congressional debate over the law, labor union supporters, viewing the bill’s ban on union expenditures as an attempt to drive them from politics, expressed concern about how the provision would affect labor newspapers. Echoing that concern, President Truman vetoed the bill and declared it “a dangerous intrusion on free speech, unwarranted by any demonstration of need, and quite foreign to the stated purpose of this bill.” Congress overrode his veto. Nonetheless, after a string of setbacks in court, the Justice Department stopped prosecuting union political expenditures during the 1950s because it did not believe that a court would find the expenditure ban constitutional.

The law made its way to the Supreme Court in U.S. v. Auto Workers in 1957. Unfortunately, the Court’s majority went out of its way to avoid reaching the issue of the law’s constitutionality. Justice Douglas, joined by Chief Justice Warren and Justice Black, filed a dissent that argued that not only should the Court hear the case, it should strike down the ban as an obvious violation of the First Amendment:

Some may think that one group or another should not express its views in an election because it is too powerful, because it advocates unpopular ideas, or because it has a record of lawless action. But these are not justifications for withholding First Amendment rights from any group—labor or corporate. First Amendment rights are part of the heritage of all persons and groups in this country. They are not to be dispensed with or withheld because we or Congress thinks the person or group is worthy or unworthy.

Justice Douglas concluded by calling the ban “a broadside assault on the freedom of political expression guaranteed by the First Amendment.” Likewise, the majority opinions in Austin and McConnell both attracted vigorous dissents from a number of justices.

In short, the idea that the government could ban independent expenditures by groups it did not like had been vigorously resisted since it was proposed. President Obama’s “century of law” was far from settled.

Myth 3: Corporations cannot have free speech rights because the First Amendment protects only individuals.

In its criticism of Citizens United, the New York Times (ironically, a for-profit corporation that routinely uses its general treasury funds to advocate for the election or defeat of federal candidates) said the following: “Most wrongheaded of all is its insistence that corporations are just like people and entitled to the same First Amendment rights.” Similarly, Representative Chris Van Hollen stated that Citizens United “is a decision that equates, for the purposes of expending monies in elections, says [sic] that corporations equal individuals. I think it is an un-American decision. . . . ” Justice Stevens also accepted this argument in his dissent in Citizens United, arguing that the “speech” referred to in the First Amendment applies only to “oral communications by individuals,” and that because corporations are “artificial entities,” they “do not have the technical capacity to speak.”

Of course, this conclusion ignores the actual words of the First Amendment. The First Amendment provides: “Congress shall make no law . . . abridging the freedom of speech.” It does not say, “Congress shall make no law abridging the freedom of speech of individuals.” It does not say, “Congress shall make no law abridging freedom of speech, except for two or more people.”

To paraphrase Hugo Black, “No law” means “no law.” Put simply, the First Amendment is a restriction on government power. The First Amendment restricts the ability of government to restrict the rights listed in the amendment—it certainly does not create a limitation on those rights so that they apply only to individuals acting alone.

Taken to its logical conclusion, the belief that “only individuals have constitutional rights” would have serious consequences for the economic health of the nation. If only individuals are protected by the Bill of Rights, can the government seize Apple’s intellectual property without paying for it, regardless of the Fifth Amendment? Can the government quarter troops at the AFL-CIO’s headquarters, despite the Third Amendment? Can it search the ACLU’s offices without a warrant because the Fourth Amendment does not apply?

Corporations and unions are not individuals, but they are made up of individuals who have banded together for common purposes. Marriages, partnerships, neighborhood organizations, and rock groups also are not individuals, but rather associations of individuals who have decided that acting cooperatively is more effective than acting alone. To hold that First Amendment rights dissipate the minute one person begins to act in concert with another would neuter the Bill of Rights as an effective check on unrestrained government power. As Chief Justice Roberts put it in his concurrence in Citizens United, “The First Amendment protects more than just the individual on a soapbox and the lonely pamphleteer.”

It is clear that the attacks on the Court for the Citizens United decision rest on specious and factually dubious grounds. This latticework of myth is necessary to avoid the simple truth that the law at issue in Citizens United violated the First Amendment and gave the government unprecedented power to criminalize political activity. During oral argument, lawyers for the government argued that the law gave the government the ability to ban books, pamphlets, and political signs if they were produced by the wrong people using funds from the wrong source. It is inconceivable that a law passed by Congress that made it a felony to publish a book or pamphlet was not a law “abridging the freedom of speech.”

No amount of myth can cover up that fact.

William R. Maurer is executive director of the Institute for Justice Washington Chapter and lead attorney in IJ’s legal challenge to Arizona’s “Clean Elections” system.